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Ruling

Subject: Residency

Question and answer:

Were you considered an Australian resident for tax purposes during the months of X and Y the relevant year?

No.

Is your foreign employment income earned during the months of X and Y in the relevant year assessable in Australia?

No.

This ruling applies for the following period:

1 X 2012 to 30 Y 2012

The scheme commenced on:

1 X 2012

Relevant facts and circumstances

You are a citizen of a foreign country.

You arrived in Australia on a date on a working holiday visa.

You worked for your employer for a period and lived in the same place throughout this time.

You departed Australia on a date to return to the foreign country for their summer months staying with family.

At the time of your departure you had been in Australia for more than 183 days in the relevant income year.

You worked in the foreign country throughout this time, and have now returned again to Australia. You arrived on a date.

You are currently on temporary visas and staying with friends.

Your intentions in regard to residency are uncertain. Initially you came to Australia for a holiday. You are looking at different visas, what is possible and what is not possible. At this time your plan is to go home.

You have a usual place of abode overseas.

Neither you nor your spouse is or was an employee of the Commonwealth of Australia Government.

You are over 16 years of age.

Relevant legislation provisions:

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1936 Subsection 6-5(3)

Reasons for decision

The Australian Taxation Office (ATO) view on the residency status of individuals entering Australia is contained in Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia which notes that it is not necessary for an individual to be an Australian citizen or hold a permanent residence visa to be a resident of Australia for taxation purposes.

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are:

· the resides test

· the domicile test

· the 183-day test

· the superannuation test.

If one of these tests is met, an individual will be a resident of Australia for taxation purposes.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia states that the resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered.

However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'.

The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

Taxation Ruling TR 98/17 notes that the ordinary meaning of the word 'reside' is wide enough to encompass an individual who migrates permanently to Australia or one who is simply dwelling in Australia for a considerable time.

In most cases, the Commissioner accepts that a visit to Australia of less than six months is not sufficient time to be regarded as residing here. However, when an individual is in Australia for six months or more, the Commissioner takes into consideration the individual's behaviour over the time spent in Australia to determine if there is any degree of continuity, routine or habit in the individual's behaviour that is consistent with residing here.

In assessing an individual's behaviour while in Australia, the Commissioner considers a number of factors, including:

· intention or purpose of presence - TR 98/17 notes that having a settled purpose supports an intention to reside in Australia

· employment - TR 98/17 notes that an individual who is dwelling here for a considerable time while on an employment contract would be residing here, whereas a mere visitor on holiday would not

· maintenance and location of assets - TR 98/17 notes that having assets in Australia, such as bank accounts, adds weight to concluding an individual's behaviour is consistent with residing here

· social and living arrangements - TR 98/17 specifies that social and living arrangements are the way an individual interacts with their surroundings during their stay in Australia. Joining a professional organisation and committing to a residential lease are two examples of social and living arrangements that may indicate an individual is residing here.

In your case, you arrived in Australia on a date on a working holiday visa. After working for a period, you returned to the foreign country on a date to their summer months staying with family. You worked in the foreign country from a period and beyond, until you returned to Australia on a date. Your intentions in regard to residency are uncertain. Initially you came to Australia for a holiday. You are looking at different visa options. At this time your plan is to go home to the foreign country, where you have your usual place of abode.

On balance and based on the above, you are not considered to be a resident of Australia according to ordinary concepts under the resides test as your ties to the foreign country are stronger than they are to Australia.

Therefore, you are not a resident of Australia under the resides test.

The domicile test

If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. 

In your case, as you are still a foreign citizen while living in Australia, your domicile outside Australia remains unchanged.

Therefore, you are not a resident under the domicile test.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and that he or she does not intend to take up residence in Australia.

In your case, you were in Australia for more than 183 days in the relevant income year. You were present in Australia for a total period of more than half of a year of income, i.e. 183 days. However, the Commissioner is satisfied that your usual place of abode is outside Australia and that you do not intend to take up residence in Australia.

Therefore, you are not a resident of Australia under the 183-day test.

The superannuation test

An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You have stated neither you nor your spouse is or was an employee of the Commonwealth of Australia Government. As such, both of you were not eligible to contribute to the PSS or CSS superannuation schemes. Further, you are more than 16 years of age.

Therefore, you are not a resident of Australia under the superannuation test.

Conclusion

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to have been an Australian resident for taxation purposes during the period.

Assessable income of a foreign resident

Subsection 6-5(3) of the ITAA 1997 states that foreign residents are assessable on their Australian sourced income. The income you earned in the foreign country from employment is not Australian sourced income. Therefore, it will not be assessable in Australia.